Snap shares set to price above initial range

Investor interest in shares in the owner of the Snapchat messaging app is likely to ensure enough demand to price its initial public offering above the range set by the company, according to people with knowledge of the deal.

The shares could price at $17-$18 a piece compared with the range set earlier this month of $14-$16, two people said. A price of $17-$18 would put Snap’s market capitalisation at $19.7bn-$20.8bn. Final pricing is expected on Wednesday.

Snap — a Los Angeles-based start-up famous for its disappearing photos — will be the biggest technology listing in years. Investor interest in the offering will be closely watched after a slow period for both the IPO market in the US and in tech deals.

The latest crop of hot tech companies from Uber to Airbnb have instead turned to what has been a vibrant market for private fundraising creating a stable of so-called unicorns, tech companies whose valuations have topped $1bn without tapping the public market.

Snap has previously aimed for a valuation of as much as $25bn, according to people with knowledge of the deal, but the price range revealed in a regulatory filing earlier in February put its proposed market capitalisation in the $16.2bn-$18.5bn range.

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The market capitalisation excludes stock given to staff, greenshoe options for the banks to sell more and a bonus stock award for Evan Spiegel, Snap chief executive, if the offering is successful. Snap’s last private valuation, probably including at least the stock awards for staff, was about $16bn, according to people familiar with the deal.

The company and its bankers have been pitching the shares to investors in London and across the US for the past two weeks. The response has been mixed with some portfolio managers saying they weren’t interested because Snap is selling shares in the IPO with no voting rights, pushing the limits of a trend among tech companies to go public but include features that preserve the control of the founders.

Snap co-founders Mr Spiegel, 26, and Bobby Murphy, 28, are not only set to become billionaires when the group lists, but also keep control.

Other investors said the shares were worth buying at a valuation of less than $25bn as a bet on the management’s ability to develop the business over time.

Snap is going public as it faces increased pressure from Facebook, the social media company now worth almost $400bn, which is rolling out copies of a key product, Snapchat’s “stories”, collections of photos that last 24 hours, in Instagram, WhatsApp and perhaps even the main Facebook app.

A spokesperson for Snap declined to comment. Spokespeople for the banks on the deal — Morgan Stanley, Goldman Sachs, JPMorgan, Deutsche Bank, Barclays, Credit Suisse and Allen & Company — either declined to comment or couldn’t be reached.

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